By Ryan Hanson
Ranking websites have become a popular trend on the internet recently. These sites rank everything from vacation destinations to new restaurants to the hottest baby names and frequently are referred to as “clickbait,” sites that encourage viewers to click as many times as possible to increase advertising revenue. As part of the trend, cities are frequently ranked in an effort to support relocation decisions by both companies and individuals. Organizations such as Site Selection Magazine, CNBC, WalletHub, Forbes, and GoBankingRates.com periodically publish these lists, ranking the various attributes of potential relocation destinations.
Three recent studies by GoBankingRates.com compared the cost of living between the 50 largest American cities, the least and most successful U.S. states, and the 10 U.S. cities that have experienced the largest recent increases in the cost of living. The studies employed data from a number of sources and surveys to make these comparisons.
The first article used the 50-30-20 rule of budgeting, which states that individuals should spend 50.0 percent of their income for necessities, 30.0 percent for discretionary items, and 20.0 percent should be saved. The article used this budgeting ratio to evaluate data on median income and data on the cost of living to compare the affordability of the 50 largest U.S. cities. Miami has the largest deficit ($44,840) between the income needed to live comfortably and median household income, while Virginia Beach has the largest surplus ($13.984). Ten of Memphis’ peer cities appear on the list (see Table 1). New Orleans has the largest deficit at $25,211, followed by Nashville’s deficit of $22,529. Memphis’ deficit is $12,022. Omaha has the smallest deficit of Memphis’ peer cities at $936.
The article points out that although Memphis has experienced recent gains in its real estate market, it remains one of the least expensive cities in the country in terms of rental property. Overall, necessities in Memphis are less expensive than those in other big U.S. cities. However, Memphis’ low median income of $36,445 makes up for the low cost of living.
The second article utilized a number of data items to determine the rankings of the most and least successful states and the District of Columbia. Tennessee was ranked 43rd. Even though the state has more millionaire households than half the other states, two factors keep the state ranked relatively low: the high poverty rates and the fact that the income of the bottom 99.0 percent of Tennesseans is lower than that of the residents of half the other states. Most of the Southeast is ranked low, with Tennessee’s neighboring states of Arkansas and Mississippi ranked 48th at 51st, respectively.
The final article used data from the Cost of Living Index and data on the cost to live comfortably to point out 10 U.S. cities where the cost of living is rising quickly. Five of Memphis’ peer cities appeared on the list: New Orleans was ranked 10th; Indianapolis, 9th; Jacksonville, 5th; Louisville, 3rd; and Nashville, 1st. Housing costs are cited as one of the biggest factors in the increase in the cost of living in Nashville. Home prices rose 30.0 percent from April 2015 to April 2017, with median home listing prices now at $340,000. According to the site, a salary of $70,150 is currently required to live comfortably in Nashville.
Links to the studies can be found below.
Of Memphis’ peer cities, the three articles paint a picture of a rising cost of living in both Nashville and New Orleans. However, the studies from GoBankingRates.com are not completely forthcoming about the methodology of the surveys they conduct or the citations of the data they use. However, data from the Cost of Living Index maintained by C2ER and median household income data from the U.S. Census American Community Survey seem to support their claim (see Tables 2 and 3).
The real issue lies in the fact that there is no standard scale for comparing one location with another. Every business and individual is unique and as such has its own set of criteria and metrics to evaluate when making these types of decisions. Likewise, each city is unique unto itself, making it difficult to use one set of data when comparing one location with another. These types of rankings make for good PR among chambers of commerce and local development boards but not much else.